LACHEN, Switzerland-Bandag Inc. franchisees in Europe will supply Continental A.G. with truck tire retreads in a deal being finalized by Bandag A.G., the U.S. company's Swiss subsidiary, and Hanover, Germany-based Continental.
The agreement in principle calls for Bandag's European franchisees to produce precure retreaded truck tires for Conti using Bandag retreading technology. The retreads-featuring Bandag tread rubber and Continental tread patterns-will be distributed via Conti's service network as well as by Bandag dealers in Europe.
The proposed deal initially calls for Bandag retreaders to supply about 60,000 tires annually, with the number rising to around 180,000 tires in the near term, both firms said. Neither company commented on the financial aspects of the contract.
The proposed alliance follows a Conti decision to outsource retreading operations due to high logistics costs, low volumes and problems of operating a single centralized retread factory, the two companies said. Bandag has more than 250 franchised retreading plants throughout Euorope.
Only days before making the Bandag deal public, Conti announced it will close this year the Bad Nauheim, Germany, retread plant operated by its Vergoelst tire distribution subsidiary. That mold cure facility has capacity to produce 1.2 million retreaded passenger and 250,000 retreaded truck tires a year, but has been operating at less than 50-percent capacity of late, a Conti spokesman said.
Conti said it believes retreading is a fleet service business that should be located close to the customer. The arrangement with Bandag, the company added, will satisfy growing demands by fleet customers who want their own tires returned rather than receiving random replacements.
Continental said the arrangement would not affect its ``Contire'' mold-cure retreading activities, which are carried out by independent retreaders under contract with Conti, the spokesman said.
The Vergoelst unit reported a $15.4 million loss last year on sales of $192.1 million, according to the Continental 2000 annual report.